A person who is a resident of Canada is subject to
Canadian income tax on their world wide income.
Are you a resident?
Whether or not a person is a resident of Canada is determined by many
factors. The
amount of time spent in Canada is not the only factor considered. Other
factors include
maintaining a residence in Canada
relatives in Canada
bank accounts in Canada, and
other social and economic ties.
A
person who is a resident of Canada, and moves to another country, could still
be considered to be a resident of Canada for tax purposes.
Canada Revenue Agency (CRA) has an Interpretation Bulletin, IT-221, regarding the determination of an individual's residence status.
A person who is not a resident of Canada for any part of the year, and
visits Canada for less than 183 days in a year, will pay Canadian income tax
only on income earned from Canadian sources.
A person who is not a resident of Canada for any part of the year, but who
visits Canada for a total of 183 days or more in a year, may be deemed to be a
resident of Canada, and subject to Canadian income tax on their world wide
income for the entire year.
Non-residents and deemed residents may or may not have to
file a Canadian tax return. Much Canadian source
income will have had Canadian tax withheld when it was paid,
and in many cases there is no requirement to file a Canadian
tax return. The most common types of income earned in
Canada which are required to be reported on a Canadian tax
return are:
taxable part of Canadian scholarships, fellowships,
bursaries, and research grants, and
taxable capital gains from the disposal of taxable
Canadian property
When a non-resident or deemed resident files a Canadian tax return, they are
taxed at the current federal tax rates,
plus a surtax of 48% of the federal tax, unless income was earned from a
business with a permanent establishment in Canada. In this case,
provincial or territorial tax is paid on that income.
Deemed residents and non-residents can claim the federal basic
personal tax credit plus other applicable tax
credits. For non-residents, the non-refundable tax credits total is
pro-rated, using a calculation based on income from Canadian sources divided
by total world income.
When a non-resident disposes of certain taxable Canadian
property, such as real estate, there are certain procedures
to be followed, which include paying a tax of 25% of the
gain on the property. If this tax is not paid, the
purchaser of the property will be liable for the tax, and
thus may withhold 25% (50% in some cases) of the selling
price of the property. See disposing
of certain types of property in the Canada Revenue Agency (CRA) guide T4058
Non-Residents and Income Tax for more information.
If a tax treaty exists between Canada and your country of
residence, the terms of the treaty may reduce or eliminate
the tax on some types of income. You may be a deemed non-resident of
Canada for tax purposes if you were a resident of Canada in the year,
and, under a tax treaty, you were considered to be a resident of another
country. In this case, you will be treated as a non-resident for tax
purposes.
Part-time residents
A person who is a resident of Canada for any part of the year is subject to Canadian
income tax on their world wide income during the time that they are a
resident of Canada. During the time that they are not a resident
of Canada, they will pay Canadian
income tax only on income earned from Canadian sources.
The information on this site is not intended to be a
substitute for professional advice. Each person's situation differs, and
a professional advisor can assist you in using the information on this web
site to your best advantage.
See our Business
Directory for tax, accounting and finance-related firms in your
area.
Please see our legal
disclaimer.
